[Money Flow] ① "We Can't Fall Behind Again"... Rising Tide in Stocks and Real Estate 'Stirs'

Office worker Park Hyeri (32, female) recently resumed stock investing, which she had once stopped. This was due to the surge in secondary battery stocks. She withdrew investment funds from her internet-only bank's demand deposit account. She said, "After investing, the entire secondary battery stock sector showed a downward trend, so I didn't gain much," but added, "It's better to ride the upward trend in the stock market than to receive a steady 2% interest."

There are signs that idle funds in the market are moving en masse from banks to asset markets such as stocks and real estate. This is because the interpretation that the US Federal Reserve's (Fed) interest rate hikes are nearing their end is gaining traction, and investors who experienced previous asset price booms are quickly reacting to the recent surge in secondary battery stocks in the securities market and the signs of a rebound in housing prices in the real estate market.

According to the Korea Financial Investment Association on the 8th, investor deposits (excluding deposits for on-exchange derivatives trading) amounted to 57.1605 trillion won as of the 1st. This is a 16.0% (7.8856 trillion won) increase compared to the end of January (49.2749 trillion won). It also increased by more than 1 trillion won compared to the previous day, the 31st of last month (55.9865 trillion won).

Investor deposits, which serve as standby funds for the stock market, were in the 75 trillion won range as of January 2022 but continuously declined as the base interest rate hikes persisted, plunging to the 47 trillion won range by the end of February this year. Since March this year, they hovered around 50 to 53 trillion won but have shown a clear upward trend since last month.

On the other hand, standby funds remaining in banks are clearly declining. The demand deposit balance (including MMDA) of the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) stood at 600.4492 trillion won at the end of last month, down 23.4239 trillion won (3.8%) from the previous month. Demand deposits, unlike fixed-term deposits and savings, allow free deposits and withdrawals at any time, which benefits banks' profitability and allows financial consumers to manage funds flexibly.

The real estate market, which declined throughout last year, is also showing signs of gradual recovery. The household loan balance of the five major banks increased by 975.5 billion won to 679.2209 trillion won compared to the previous month. The increase in household loan balances turned positive from May (143.1 billion won) and has been expanding monthly with 633.2 billion won in June and 975.5 billion won in July.

As evidence of this, housing transaction volumes are also clearly recovering, although they have not yet reached normal levels. According to the Ministry of Land, Infrastructure and Transport, nationwide housing sales, which stood at 25,761 cases in January, more than doubled to 52,592 cases in June. In May, the volume surpassed 55,000 cases, marking the highest level of the year.

The flow of market funds back into asset markets is gaining momentum because the interpretation that central banks' interest rate hikes worldwide are nearing their end is gaining strength. An official from the authorities said, "International credit rating agency Fitch downgraded the US credit rating by one notch. In 2012, this would have caused significant market turmoil, but this time there is little shock," adding, "The US economy is relatively strong, and market expectations remain intact."

The real estate market is also increasingly likely to achieve a soft landing due to the government's active liquidity supply. Previously, the government supplied special home mortgage loans exempt from the Debt Service Ratio (DSR) and eased regulations on reverse mortgage loans, continuously sending positive signals to the market.

An official from a commercial bank said, "Although interest rates are still rising slightly, the overall market widely perceives that the Fed and the Bank of Korea's rate hikes are nearing their end, so expectations outweigh concerns," adding, "Financial consumers, including those in their 30s who had to watch the real estate boom in 2020-2021 and those experiencing FOMO (Fear Of Missing Out), seem to be responding quickly."